Rosalind Levačić, International Consultant, World Bank
and Emeritus Professor of Economics and Finance of
Education,
Institute of Education University of London
Overview of presentation
1. Defining a possible model of per capita
financing for general education in Serbia
2. Benefits of a per capital financing system
for general education
3. Challenges of a per capita financing system:
i.
ii.
During implementation phase
Long term
The 3 elements of per capita funding (PCF):
state, municipality, school
Central government
Ministry of Finance
Ministry of Education
State
Autonomous
Province
Municipality
Municipality
School
School
formula
Municipality
Municipality
Municipal formulae
School
School
School
School
Municipal
formulae
School based budgeting
3
A fully developed PCF system
Consists 0f three essential elements:
1. Central government uses a per capita formula to
determine education transfers to municipalities (local
government units) which administer schools.
2.
Municipalities use a local formula to allocate single
line (lump sum) budgets to their schools for all major
resources, including staff.
3.
Schools have financial autonomy (manage their own
budgets) (school principal + school board): the number
of teachers is determined by the school according to what
it can afford from its budget.
4
A per capita funding formula is not just a fixed
amount per student
 The number of students is the main indicator in the
formula but .....
 Students
are
differentiated
according
to
characteristics that cause the costs of educating them
to differ: e.g. grade/age, curriculum, location, minority
language, social disadvantage.
 Other factors may be included in a formula:
e.g. level of economic development of municipality
For schools: type of heating, size of school, population
density.
5
School based-budgeting: management of the
budget
School principal and school board plan the budget: they decide
how much goes into each budget line.
The budget plan determines the number of teachers and other
staff at the school.
Principal:
 manages the budget (assisted by a school accountant)
selects and appoints staff (national salary scales)
is accountable to the school board and the local self
government for the budget
Principal and School Board operate within the Ministry of
Education’s framework of education goals and national
standards.
6
Advantages of PCF
compared to an input-based financing system
Enhances:
 Efficiency
 Equity
 Transparency
 Accountability
 Local decision making
Supports other measures to improve the quality
of education
7
EFFICIENCY = OUTPUTS
INPUTS
outputs
inputs
Outputs in education are varied and
difficult to measure. They are:
Knowledge and skills leading to
employability and income;
Measured by student attainment tests
Society-wide benefits
Inputs
Teachers (knowledge and expertise)
Non-teaching staff
Physical inputs:
to support learning
to provide school environment
EFFICIENCY CAN INCREASES BY REDUCING INPUTS
while output stays constant
time
outputs
outputs
inputs
inputs
By itself per capita funding can achieve this
EVEN BETTER! EFFICIENCY IS INCREASED BY
RASING OUTPUT with inputs constant
time
outputs
inputs
outputs
inputs
To achieve this, per capita funding must be part
of a school governance system that focuses
on outcomes for students
PCF alone doesn’t raise the quality of education
School
evaluation
Accountability for
student learning
outcomes
Externally validated assessment
Teacher
quality
Curriculum
Per capita funding and
school based management
EFFICIENCY AT MUNICIPAL LEVEL
PCF promotes school network optimisation
 Because funding depends on the number of students,
municipalities do not lose any education transfer if
reduce number of schools and staff.
 Money saved by closing schools can be spent on
transport and improved school facilities.
 Student attainment is higher in larger single grade
classes than in very small classes in small rural schools.
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GREATER EFFICIENCY AT SCHOOL LEVEL
Schools are able to make decisions on how to spend
the budget. Schools:
 know their own resource needs best;
 can economise on utilities and use the money on
their priorities e.g. learning materials, equipment,
minor renovations to school building;
 can more easily procure the goods and services
they need to support learning.
School improvement plans are supported by schools’
flexibility in using resources.
EQUITY BENEFITS OF PCF AT MUNICIPAL LEVEL
State formula allocates transfers fairly to all
municipalities according to objective factors of
need to spend and ability to spend.
 Student numbers weighted by cost per categories of
student (grade, course profile & minority language, low population
density, special educational needs, social disadvantage).
 All students funded to a minimum national cost
standard. Government contributes x% and municipality
required to contribute (1-x)%.
 Differences in municipal wealth taken into account: x%
larger for poorer municipalities.
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EQUITY BENEFITS OF PCF AT SCHOOL LEVEL
Municipal funding formula:
Students funded according the same criteria in all
municipal schools.
Encourages inclusion: extra weighting per student for:
special needs
minority language
social disadvantage
isolated rural location
Incentives for schools to recruit and retain students as
paid per weighted student
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Greater local decision making
Greater role for local communities in decisions about
schooling and hence in developing civil society
institutions. Through:
• Municipalities taking on more responsibility for the
quality of schools in their territory
• School principles developing as education leaders and
managers of their schools
• School Boards (with majority parent and community
representation) having an important role in decision
making – agree and monitor school budget
Greater transparency and accountability

State and municipal funding formulae:
make transparent how much each municipality
and school receive in public funding.

School costs and costs per student are
transparent.

School-based financial management:
principal held accountable for how school
budget is spent and with what results.

Very important role for School Board in
holding school principal accountable.
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CHALLENGES FOR PER CAPITA FUNDING
OF EDUCATION
 Temporary:
during implementation period
 Long term
Easing adjustment for budget losers
 The whole point of PCF is to change the
distribution of education funding to make it
more efficient and more equitable.
Winners and losers: some municipalities and
schools receive more funding per pupil than
before and others less.
Some schools and classes must be closed and
teachers made redundant.
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Buffer funding for municipalities
Money kept back to reduce losses and gains. For example:
Year 1 Losing municipalities receive at least 95% of last year’s
transfer
Winning municipalities receive no more than 105% of
transfer if previous method of funding used.
Year 2 Losing municipalities receive at least 90% of transfer in
year 1
Winning municipalities receive no more than 110% of
transfer in year 1
Year 3 Losing municipalities receive at least 75% of transfer in
year 2
Winning municipalities receive no more than 125% of
transfer in year 2
Year 4 Formula determines transfers for all municipalities.
Encouraging municipalities to optimise
school networks
 Ministry of Education sets out criteria and assists
with advice on analysis of school network
 Provision of redundancy pay and enhanced
retirement for school staff conditional on
permanent removal of positions
 Incentive grants for municipalities submitting
school network optimisation plans for improving
remaining schools
First year of school budgets
Problem: financial year starts in January and school year
in September. If number of teachers has to be reduced
due to budget constraint, must be done in September
to avoid disrupting students’ education.
Solution
Adjust formula determined school budgets in year 1 so
that there is sufficient to pay for existing teachers from
January to August.
Building capacities in municipalities and
schools
 Training programme needs to be planned and
resourced for:
 Municipal finance officers in formula funding
 Municipal and school accountants in executing school
budgets
 School principals in planning and managing budgets
 School Board members in planning and monitoring the
school budget and holding principal to account
 Support and advice- Help Desk
Long term challenge: formula
Select PCF formula indicators that provide right
efficiency and inclusion incentives:
1.

must be factors municipalities cannot manipulate to
get more money (NOT number of classes, schools, staff or students
categorised with specific special needs)


not past expenditures
use indicators that predict cost differences e.g. low
population density, poverty, income per capita
2. Ensure municipalities and schools do not supply
inflated data to get more money- data audits
3. Good Education Information System essential
Long term challenge:
schools decide staffing
Managing school budgets
School principals and Boards must have flexibility in
choosing class organisation and staff structures.
 Abolish norms on administrative, technical and
support staff
 Set large maximum class size because schools are not
funded to run 2 or 3 small classes per grade
 Have very few subjects where splitting class into 2
teaching groups is compulsory
Long-run challenge: ensuring funding
benefits students
 Education transfer to municipalities is earmarked
(is categorical)
 Municipalities must top up the state transfer per
student to at least the defined national cost standard
 Place a limit on the proportion of the school’s budget
that can be spent on staff salaries (e.g. 85% maximum)
 Hold school principals accountable for management of
the budget


Auditing and sanctions
Strengthening and training School Boards
Long term challenge: preserving access
Preventing closure of small classes and schools that are
needed for maintaining access.
Set clear criteria for additional funding of these
schools excluding inefficient high cost schools.
Additional funding through:
• more complex funding formulae
or
• keep these schools out of the formula and fund
according to number of classes needed
Long term challenge: develop principals as
educational leaders at top of career ladder
Financial and resource manager: accountable for good
management of school budget
AND
Instructional leader: accountable for quality of education
and standards achieved by pupils.
Appoints teachers
Evaluates teachers’ performance
Improves teacher practice
Long term challenge:
create effective School Boards
Vital in holding school director to
account and making his/her activities
transparent.
School Boards must have a constitution:
sets out responsibilities and powers;
School staff must be in a clear minority – School Boards
are NOT workers’ councils.
Training school board members: must be always available
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Challenge for Ministry of Education in a system
of self-managing schools
The Ministry of Education moves from a concern
with rules about input standards in a centralised
system to focussing on output standards in a
system of self-managing schools.
Educational goals are set in terms of learning
outcomes for students and these are monitored
by the Ministry of Education – at national, local
government and school level.
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The biggest challenge: putting in place all the
elements of a school system focused on outcomes and
quality
School
evaluation
Accountability for
student learning
Community involvement
Parental support
Externally validated assessment
Teacher
quality
Good leadership
Curriculum
Per capita funding and
school based management
I’m sure you will meet these
challenges successfully.
Thank you for listening.